Equipment Finance Guide Australia | Chattel Mortgage, Hire Purchase & Leasing

By AusTaxTools Editorial Team · March 17, 2026

Short answer

Equipment finance in Australia comes in three main forms: chattel mortgage (you own the asset from day one), hire purchase (you take ownership after the final payment), and operating lease (you never own it). The right choice depends on whether you want to claim depreciation, how you handle GST, and whether you plan to keep or return the equipment at the end of the term.

Chattel mortgage

You own the equipment from settlement. Claim GST on the purchase price upfront in your next BAS. Claim depreciation and interest as tax deductions. A balloon (residual) payment can reduce monthly costs. Best for GST-registered businesses that want ownership and maximum tax deductions.

Hire purchase

The lender owns the equipment until you make the final payment. You can still claim depreciation and interest. GST is claimed progressively on each payment rather than upfront. Suitable if you want ownership at the end but prefer to spread GST credits over the term.

Operating lease

You rent the equipment for a fixed term with no ownership at end. The entire lease payment is a tax-deductible expense. No depreciation claim since you do not own it. Best for equipment that becomes obsolete quickly or that you want to return and upgrade regularly.

Common mistakes

Choosing an operating lease for equipment you plan to keep long-term — you pay for the full life of the asset without building any equity in it.
Not claiming the GST credit upfront on a chattel mortgage — this is a significant cash flow benefit that many businesses miss in their first BAS after purchase.
Setting the balloon too high to minimise monthly payments, then struggling with a large lump sum at the end of the term.
Financing equipment with a useful life shorter than the loan term — you end up paying for something that no longer generates revenue.

Business repayment calculator

Model equipment finance repayments with different rates, terms, and balloon amounts.

Cash flow impact calculator

See how equipment finance repayments fit into your monthly business cash flow.

Model it first

The right finance structure saves tax — the wrong one costs cash flow.

Calculate your repayments and see how different balloon amounts and terms affect your monthly costs.

Calculate repayments

Related guides

ABN & Business Credit

How your ABN age, business structure, and credit history affect loan eligibility and rates.

Business Loan Types

Term loans, lines of credit, equipment finance — match the product to your cash flow.

Frequently asked questions

Which equipment finance option gives the best tax deduction?

Chattel mortgage lets you claim depreciation and interest as tax deductions, and you can claim the GST upfront on the purchase price. Hire purchase also allows depreciation claims. Operating leases let you claim the full lease payment as an expense but you cannot claim depreciation since you do not own the asset.

What happens with the balloon payment at the end of equipment finance?

With a chattel mortgage or hire purchase, you pay the residual (balloon) to take full ownership. The balloon reduces monthly repayments during the term but leaves a lump sum at the end. If you cannot pay it, you may need to refinance or sell the equipment.

Can I finance used equipment in Australia?

Yes, most lenders finance used equipment, but they may require a valuation and the equipment must typically be under a certain age — often 10 years old at end of loan term. Rates for used equipment may be slightly higher than for new.